Condominium or Landed Property?

Lately, I have been arguing with my mom about buying property. I suggested her to buy condominium. However, she does not like my idea. She prefers landed property. Except staying in condominium is dangerous, she hates the trouble of having to take lift up to home once you park the car. What I found amusing is she also mentioned how troublesome it would be if your friends or relatives have to go through security and take lift to go up to your home. It may end up losing friends or relatives to pay a visit to you. I realised that whatever she said made sense.

However, I asked her further question. The property is for investment or own stay? Whatever she said above is so obvious that she buys for her own stay. Many people wonder which type of property is good for investment and own stay.

If you wish to go for investment, buying condominium is the best. However, you must consider the surrounding of the condominium. If you buy a unit in a condominium in area near to colleges, universities or train stations, you may have your units rented out quickly. For example, you buy a property with RM250,000. If you do survey and find out that market for rental is RM2,500, then the investment return from rental of this property is very good. It is because market value for rental of a property worth RM250,000 would be around RM1,200 to RM1,500. Apart from that, maintenance is taken care by the developer. So it could be less hassle. Apart getting high investment return from rental, you can go for swimming, gym and other activities at anytime, saving the money of joining any clubs.

Of course if you want to live under glamour life style and enjoy using the facilities in condominium, you can go on buying a unit in condominium. It solely depends on your need.

If your intention of buying a property is for own stay, you are advised to go for landed property. Own stay is a long term planning. You may want to pass to your children. If you buy a property in a freehold land, the property will worth more. Landed property home will also get old but the land will appreciate over time. Landed property home also has more privacy.

In a investor' point of view, landed property will appreciate better than high-rise. The main reason - land tends to grow scarce in times to come, as development and resident population quickly catches up. Thus, the larger the population, the more rapid the development, the more expensive prime land costs. Not to mention, the cost to reuse former high-rise land will always be higher than the cost to reuse lands that once were landed property (houses or structure less than 2 or 3-storey high).

People say that landed property will appreciate better as compared to condominium. In my opinion, there is no saying that landed property will appreciate better than condominium. In my working, as I do verbal indication for the bankers when they call in, I realise that many landed property does not appreciate much. They even maintain the same market value 10 years until now. I also encounter cases when the market values of condominiums appreciate RM300 psf in a year. Mostly, it only happens for condominiums in Kuala Lumpur city centre. Again, it solely depends on your sight and perspective about potential development or area. Of course talking about long term, landed property will appreciate greater than condominium as condominium will depreciate over time.

However, it doesn't matter if you're a house buyer or an investor. It is common knowledge that the property life expectancy of a landed property will definitely outlived those of a high-rise property. A condominium or an apartment will see its value depreciate after a certain period of time (usually when it is no longer new, or safe to live in), while a landed property will still have its land’s value, which will rarely depreciate over time.

(adapted from estate 123)

Legal Issues

As I am fresh in property field, it would be advantageous if I post something that benefit myself and readers who intend to buy first property and have no idea about legal facts in buying property. It would also do good to foreigners who intend to work in Malaysia and find property to settle down.

Issues like legal fees that need to pay to lawyer, stamp duty and real properties gain tax.

Legal Fees Payable in Buying a Property

The legal fees payable to a lawyer acting for you when you buy a property is calculated based on the purchase price as follows:

-For the first RM150,000, the legal fees payable is 1%

-For the next RM850,000, the legal fees payable is 0.7%

-For the next RM2,000,000, the legal fees payable is 0.6%

-For the next RM2,000,000, the legal fees payable is 0.5%

-For the next RM2,500,000, the legal fees payable is 0.4%

-For the remaining, if any, negotiable

For instance, if the purchase price is RM400,000. The calculation is as follows:

Total legal fees payable:

(RM150,000 X 1%) + (RM250,000 X 0.7%) = RM 3,250.00

No discount rule

According to solicitors’ Remuneration Order, lawyers are strictly not allowed to give discount in conveyancing matters.

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STAMP DUTY PAYABLE

A purchaser of a property has to pay stamp duty to the Malaysian Government when he buys a property.

To calculate stamp duty fees, the stamp duty chargeable on the sale and purchase Agreement is RM10 each. The stamp duty chargeable on the Memorandum of Transfer is calculated based on the purchase price as follows:

-For the first RM100,000, the stamp duty payable is 1%

-For the next RM400,000, the stamp duty payable is 2%

-For any sum exceeding RM500,000, the stamp duty payable is 3%.

For instance, if your purchase price is RM800,000. The calculation is as follows:

Total stamp duty payable:

(RM100,000 X 1%) + (RM 400,000 + 2%) + (300,000 X 3%) = RM18,000.

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Stamp Duty Payable when Renting a Property

(Wow! I do not know renting a property is chargeable for stamp duty)

Stamp Duty Computation (for a 2 years tenancy)

monthly rent x 12 - 2400
----------------------------------- x 2 years

250

For example, if the monthly rental is RM8,000, Stamp duty payable is as follows:

RM8,000 X 12-2,400

----------------------------------- x 2 years = RM748.80

250

However, it would be the best to appoint a lawyer and have him/her to advise you in the law issues. Legal issues could be complicated.

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Real Properties Gains Tax

With effect from 1st April 2007, all persons are exempted from the provisions of the Real Properties Gains Tax Act 1967.

However under proposed budget 2010, the RPGT of 5% would be imposed from Jan 1 on gains (minus 10% or MYR 10,000 whichever is higher from the gain) from the disposal of real property irrespective of the holding period and category of owner.

(Adapted from http://www.propertylink.com.my/investmentguide.php)

Units Available to Rent in Villa Vista, Damansara Heights

Units Available:

First Unit


Living Area & Master Bedroom

Balcony & Bedroom 2

Toilet & Bedroom 1

Study Area & Bedroom 3

Type: 3+1
Built-up: 2,962 sq ft
Furnishing: Fully furnished
Rental: RM6,000

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Second Unit

Master Bedroom & Balcony

View from Balcony & Living Area

Study Room & Bathroom

Bedroom & Kitchen

Dining Area

Type of Unit: 2+1
Built-up: 2,124 sq feet
Furnishing: Fully furnished
Rental: RM6,000

As I mentioned in my previous post, if interest person wants to rent this unit to be unfurnished, the building manager will rent it out with rental price according to unfurnished unit price. It would be RM4,000. We can say that it is flexible and to meet customer's need.

Property Leasing

Recently, I am doing market study in condominiums. I met some building managers. They hope that I could help them up to get the vacant units sold or rented out.

Located in Damandara Heights, Villa Vista is a low-rise and low density condominium. It consists only 12 units ranging from 1721 sf to 4,710 sf. The condominium consists 2 penthouse units. Basically, the units in the condominium is not for sale. The interest part is the whole condominium is available for sale for RM25.5 mil. There are 18 covered and 4 uncovered carparks. The management is planning to convert the office to gymnasium and sauna.

Types of Unit Approx. Built-up Area (sq. ft.) Approx. Rental per Month (RM)

2 Bedrooms + 1 Utility 1,721-2,124 4,000-6,000
3 Bedrooms 1,945-1,948 4,000-6,000
3 Bedrooms + 1 Utility 2,417-2,962 4,500-6,000
Duplex Penthouse 3,595-4,710 7,000-12,000

Facilities - Function Area, Swimming Pool, 24-hr Security, Covered Parking, Sauna, Water Feature, Wading Pool, Pool Deck

As I went to do site inspection, I personally rate the condominium.

Location - It is quite a distance to the condominium from Jalan Duta. However, as the condominium is located in hill, tenants can enjoy the view of Kuala Lumpur. Some units also have the view of Twin Tower. --------- Good

Building Quality - The building is well-maintained. -------Fair

Facilities - The facilities offered are not much. However, as mentioned, the management office will be transferred and the space will be converted into gymnasium and sauna. The idea is still under planning. ------ Fair

Common Area - To be honest, I do not like the design of the condominium . The common area is not fully utilised, for me. ------ Fair

Carpark - Not much to comment about carpark. ------Fair

Management - The building Manager I met was very friendly and kind. He provided me a lot of information about this condominium. So I believe he will assist the tenants of the condominum as much as he can. -------Good

Function Area and Carpark

Swimming Pool and Pool Deck

Walkway and View of KL from the condominium

The area is for store. Whoever interested can buy this space and renovate to convert into home.

Swimming Pool and low-rise block

Water Feature

According to the Building Manager, he said that the rental is negotiable. He stresses in flexibility. If you wish to rent a unfurnished unit and want to buy your own furniture, the building manager will have people to remove the furniture in the units. If you want it to be fully furnished, the building manager will take care of everything. The price would be quoted based on the furnishing provided.

The Effect of Size of A Unit to Rental Return

Various sizes of units affect various rental. To take Setapak Ria, a well-known Condominium for students of Tunku Abdul Rahman in Setapak as an example, the condominium offers units ranging from 911 sf to 1,300 sf. Assume that the units are unfurnished, the rental range from RM800 to RM1,200. A 911-sf-unit is rented out with RM800 and a 1,330-sf-unit is rented out RM1,200 per month.

Many investors prefer to buy a smaller unit for investment. Of course the prices for smaller units are affordable for many investors. In renting out the unit, it is wise for owner to check the market value and the rental rate for other condominiums in similar area. You will not want your unit stayed empty because you rent out your unit with high rental price. Vice versa, you will also not want your investment return is negative just because you put a below-market-value rental rate.

In place like Kuala Lumpur City Centre, many working individuals and expatriates prefer to rent a studio or 1-bedroom units. In planning to buy a small unit for investment, you also need to know the total units of similar types of units and other small units. I do not think that you will want to compete with other 100 same-sized units for tenants. It would bring less advantage to you. If you target for expatriate, make sure you know their basic requirements for home rental, for example the design of the unit and furnishings.

I used to think that bigger unit costs higher in per square foot. I was wrong. In an article, I understand that there are cases where smaller units costs higher and bigger units cost lower in per square foot. For example, a larger unit with 1,900+ sq. ft., is priced at RM430psf whereas a smaller unit, 1,600+ sq. ft., is approximately RM450psf. Both units are on the same floor.

Between staying in condominium and landed property, I prefer to stay in landed property (assume that the rental rate is similar). Some people prefer to stay in condominium with facilities provided. Suffice it to say, investors should analyse your potential tenant – their needs and motivation to rent your unit.

Factors to Consider for Property Investment

If you are the beginner of property investment, there are some basic knowledge you need to know. They key factors you need to consider for property investment are:

· Location

· Accessibility

· Neighbourhood

· Land Tenure – Freehold/Leasehold

· Land Status – Residential/Commercial

· Developer’s track record – Branding

· Team of consultants

· Unique feature

· Finishing

· Packaging

· Maintenance charges

· Car park facility

· Choice of Units (Range of built-up sizes)

· Timing of Purchase

· Layout

· Pricing – Capital appreciation and rental returns

Below are the example how these factors affect the increase of market price of prestigious condominiums in KLCC:

· Idaman Residence – choice of units with not many competing types within the development;

· One KL – each unit comes with a swimming pool;

· Marc Residence & K Residence – proximity to KLCC;

· The Troika – designed by Foster & Partners architectural firm headed by multiple award-winning Lord Norman Foster;

· The Avare – Unique external facade of a glass-curtain walling;

· Pavilion Residence – mixed-development concept.

In Case You Don't Know

Working in property allows me to know how developers price their property during launching. Nowadays, I help the valuers to do verbal indication. The bankers will expect a certain price and most of the time, we couldn't give the price they want. They will question us why the value is so low that the buyer bought it in higher price.

Actually, if you buy a unit in a new condominium, the price of the unit is not a market price. During the feasibility study stage of a proposed development, the developer will do market survey to check the current market value of same type of property. After knowing the market value, they will mock-up the price to maximise their profits earned from the whole development. In another word, the listing price the developer put is not market value. It is the agreement between buyers and developer that buyers are willing to buy homes with that listing price.

Available Rent in Condominium Lot 16

Lot 16, Ampang Hilir a low-rise Condominium of Ampang, Kuala Lumpur located at an exclusive neighbourhood comprise of low rise condominium and bungalow houses. It is located nearby few foreign Embassies. The condominium is only available for rent but not for sale. The maintenance fees are included in the rental.

Facilities - Swimming Pool, Covered Carpark, Landscaped Garden, Gymnasium, 24-hr Security, Playground, BBQ Pits

Tenure: Freehold

No. of Block: 1

No. of Storey: 3

Total Unit: 18

Units per Floor: 6

Maintenance Fees: n/a